After the successful placement and layering of money from illegal proceeds, criminals need to find a way to integrate it back into the legal economy. This process is called integration. Integration is the final stage of the money laundering process; as a result, it is tough to differentiate between illegal and legal wealth at this stage.
Between 2% and 5% of global GDP is laundered every year, equating to between €715 billion and €1.87 trillion annually. In summary, integration involves complex layers like corporate structures, real estate, and digital finance channels, enabling criminals to 'clean' their money at huge global scale
However, just like during the placement and layering stage, there are ways to recognize integration activities. We covered all that and more in this article, let's dive right in!
What is Money Laundering?
Money laundering is the process through which criminals mask proceeds from illegal activities to avoid law enforcement and relevant authorities. Basically, there are 3 stages of money laundering, which are placement, layering and integration.
Placement is the step in which the criminal introduces money from illegal activities into the financial system; in layering, they run it through several legal financial transactions to mask its source. Finally, integration is the stage where the money is reintroduced into the legal economy.
Anti-money laundering laws are structures put in place to detect and curtail money laundering activities. However, more often than not, criminals have come up with complex ways to bypass them, taking advantage of when businesses slack in or neglect their duties. As a business, it is important that you understand these methods and set up effective countermeasures based on your customer risk profile and jurisdiction.
What is Integration in Money Laundering?
Integration in money laundering is the final stage of a money laundering process where the money is reintroduced to the legal economy. In integration, the money is reintroduced into the legal economy after a series of reconditioning. This is done to give the money a legitimate appearance.
During integration, the money is used to make high-value purchases like luxury goods, real estate, and residential or commercial property. The activity is done very carefully with proven legitimate sources to create a valid explanation for where the money came from. Therefore, it is hard to distinguish legal from illegal at this stage, and the criminal can use the money without getting caught.
To effectively counter integration, businesses need to have documentation from the previous stages as evidence. However, most times, there is usually an overlap between the three stages of money laundering that can be tracked.
How is the integration stage in Money Laundering Achieved?
Integration in money laundering, Here are some examples of methods of integration in money laundering:
1. Real Estate Investments
Illicit funds are used to purchase real estate, often through overvaluation, shell companies, or third-party transactions. The property can later be sold to generate legitimate returns.
2. Luxury Goods and High-Value Assets
Criminals buy expensive items such as artwork, jewelry, luxury vehicles, and yachts. These assets can be resold, rented, or used as collateral to justify the source of wealth.
3. Shell Companies and Front Businesses
Funds are funneled into businesses that appear legitimate but exist primarily to launder money. Common examples include restaurants, casinos, and import/export businesses, which allow the mingling of illicit and clean revenues.
4. Loan-Back Schemes
The launderer creates a fictitious loan agreement and “repays” the loan using illicit funds, disguising them as legitimate debt repayments.
5. Banking Products and Securities
Money is invested in financial instruments such as bonds, stocks, or mutual funds. Complex layers of transactions across multiple jurisdictions make tracing difficult.
6. False Invoicing (Trade-Based Money Laundering)
Fictitious invoices are used to move funds across borders. Goods may be over-invoiced, under-invoiced, or never shipped at all to justify the movement of funds.
7. Cryptocurrency Conversion
Criminals convert cash into cryptocurrencies to obfuscate the origin and ownership of funds, eventually withdrawing them through crypto exchanges or peer-to-peer platforms.
These activities are done in the hope that the money launderer can enjoy their wealth without it being traced to illegal activities.
How to Detect Integration in Money Laundering
Detecting integration in money laundering is very difficult because it is the final stage where the process is almost complete. As said earlier, you would need to have been tracking the launderers from the first two stages and gathered document proofs as evidence.
Ongoing transaction monitoring and sanction screening is the best way to identify launderers at this stage. However, to be effective, you’d need to have established a robust AML system that complies with the level of risks of conducting business. An effective enhanced due diligence also goes a long way in identifying and preventing money laundering early on.
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